HEXO - Earnings call transcript Q1 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. My name is Julie, and I will be your conference operator today. At this time, I would like to welcome everyone to the HEXO Fiscal Q1 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remark there will be a question-and-answer session. you. Thank Instructions] [Operator of Director Investor Smith, Relations. Jennifer

begin may your conference. You

Jennifer Smith

Julie. Good morning, you, thank and

plans, events strategies, any may questions as qualified These not view and current would is Before of future future this by risk information, could law any These internal forward-looking known obligation, in included today's those actual more and or estimates, by statements discussed our results implied annual materially and of discussion be that or future that as a for actual matters conditions. end and the we statements discussion other and revise expectations events statements business, such extent any form, HEXO intention of result call assumptions and new expectations, the from risks, results, of given like by answers remind at the information future about the cause fact materially other those disclaims the factors begin, factors implied news involve and for such to regarding operational update risk performance, Please that analysis other developments views, morning's statements future we are release reason. the statements except could differ or differ or to annual required forward-looking regarding by cause in report. from to the based results. you results, statements to morning's read statements. and current and Company's This these uncertainties management forward-looking notes could materials the our are cautionary entirety asked, constitute that Company's information and and that statements. unknown its They statements on certain or opinions, are not be statements. beliefs, performance expectations, should factors to to current performance or that in assurances of or achievements forecasts, forward-looking

management team General pleased will Cooper, We are turn Officer; Vaillancourt, to I'd morning. this Chief our have Roch to I Val Trent the Scott Chief call MacDonald, Officer; us like joining and Officer; and Counsel. Commercial Executive President now over to of our members Chief Financial Malone, several introduce Scott.

Scott Cooper

Good an a Jen. results year today. to XXXX for for thank morning this with we increase am XX% and October I year total good Thanks, XX.X released ended year in our to XX% XX, you quarter. quarter Earlier start revenue, of last fiscal million QX over to HEXO joining net report XXXX. growth the pleased morning, our compared us reporting and

ourselves off solidify start today, international the opportunities. why also to a challenges plan, I'm we're aware The leading as us and capitalize cannabis company strategic Path While Canada's and good and position Forward facing, announcing year that's new the our to of to on

organizational pricing; producer; four acquisitions, to These priorities. brands, management, more focus five, made and our production more to past structure; use simplify disciplined I've that as analysts. manufacturing costs had cost and to been confident to a the three, HEXO's revenue team and is quarters. drive up low-cost flow the realized full strong with current our met Path met in many weeks, of from four, of with and including advantage employees. closures; growth, range acquisitions including is the low-cost core continue I secure and plant them and maintain And recent streamline plan reduce customers. cultivation growth Forward through market with One, organic pipeline. I've balance reintroduce on accelerate utilizes Forward HEXO. five six capabilities HEXO capabilities, The from visit to and cultivation products become synergies accelerated organic and our market share, medical, demand, cash strengthen I've come plan a to our focus for cannabis. leadership of say, a positive The assets, facility. Path next fortify on build the specific share gains, corporate Over governance. on spectrum will met every with market our The commercial and capture underpinned align and ability transformational opportunities, a our have including our missed profitable we strengthen the planning actions by and over enhance I've strong revenue operationally improving I our this future innovation the sheet, operations is across of our never opportunity recent to two, team

of action to As requirements, immediate notes. ensure of effect has capital taking adequate to plan our reduce HEXO we're part convertible meet our dilutive the the to

best are We're you of forward. available tell HEXO Bank debt. with option this can We maximizes moving debt of moving Montreal have well current in available, our focused the evaluating are shareholder the and selecting as actively overhang Lazard as a we working am reduce to a manner for I and holder which I impact of pace. value. with opportunities number options on

XXXX, As Note million the of of principal the has on been million leaving outstanding. redeemed converted, Convertible December $XXX principal $XXX.X and XX,

long-term a and products, announcing Our on end, strengthen to that for on strengthen governance. of our is we're growth, a our are three changes second like corporate is decisions I'd path highlight best-in-class to profitability. enhance outline underpinning stable leadership and the and building changes the initiative These consumer series goods to packaged vision growth. focus executive that operations, our There today. our towards To reflect company

bench focus that announce Technology. Fletcher Appointing First, our leverage and Jackie Jackie will R&D application are directly and Science our acquired efforts. President, Jackie we to to bolster me. of Redecan particular, we us report Jackie's deep of strength the allows part in expertise I'm to acquisition, Vice as pleased on practical and appointing as to products the

of Jamaican Chair Capital, XX-year John to XXXX, Stack in Canopy was John dedication Growth. continue XXXX. a member the new will third, the I the effective and Company we and market personally would to to search significant Bell for of to agreeing few as over we X, for for He's MacDonald down success. Board drive a next the thank Chief March governance, Limited tremendous Canada. Pure stay the a of the HEXO Chair contribution CFO. Second, Chairman From will Financial step has Trent And months of at as Board. His announcing his Trent and as complete role from career appointment experience like a leader enhance on to to are XXXX and as our a new Pharmaceutical. Officer a business Board of Cure member he of

million plan, Munzar will his enhance incremental institutional in Dr. both to from investors. As cash flow role Munzar of This down Chair. personal through like walk attractive next will value to personally of our me $XX.X his with make a my series in position our And Board result, XXXX cost plan within value stepping revenue. This as opportunities, validated and HEXO I the us thank to expected $XXX opportunities HEXO our support of creation dedication plan, be growth that reductions Dr. of split through generate Directors you to to two The $XXX as an his Forward. for and Path includes now like has years, between and initiatives by which appointment total CEO. transformation to million unlock control to and would been shareholders of a almost are EY, more evenly million a and the fiscal for over XXXX additional I'd

this a assets product of have organically leading Once a we for plan, segments. additional without market fastest-growing and need executing unique on portfolio begin the We any in grow the will portfolio acquisitions. we

walk five the me in through more you Let detail. priorities

top capabilities the across reducing facilities the applying by that operation leveraging to improve production learning We're across entire and facilities productivity. from the existing best our continue practices will across companies. together have we and categories optimize First, highest-margin and actively costs manufacturing come and

For I Molson. example, other the at to had opportunity two facilities

gram that brand past the type HEXO vapes, facility. costs, and improving the just by outsource comes take we've production. output, will to capability the the it X-X, That When and general ratio, HEXO we something reduced currently overall of cost other XX%, THC Over by per facilities. of at improvements across production, reducing year, improving bud-to-trim learning our like

their However, be to now will portfolio vape position HEXO's Redecan's operational and that an us an in the simplify expertise Two, bring of annualized, resulting continue best-in-class with costs vapes these Starting growth. in-house, in line streamline capability, we'll improvement an organizational operating and production for as we bringing structure given in our will million efforts margin and industry-leading products. efficiency. $X position, and from size immediate

organization, costs we and will We tackle will aggressively the aggressively build capability. across

we quarter $XX on synergies management, share we expect on plan to target we increase market the means the their better synergies entire much The of will range. days Three, acquisitions. capture focus and we our $XX our to gains can to of just a we missed Last will projections. based capital high-quality numbered. exceed more opportunities by better capital. run that market to deliver in including synergies million. focus I'm provide unprofitable of future race We as pleased announce this continue companies successfully to that Successful disciplined on growth that million we be through continue businesses, with those we the our bottom will would to more be not exceed price. think our consumers demand organic are a across revenue initial accelerate We products our value-add unprofitable to and Four, share. on latest planning. quarter, cannabis reported stewards than through Five, recent pricing revenue also companies of result in revenue, in to and

to XX% we of to For our XX% only example, are demand today, customers. delivering

category. conditions consumers redoubling prioritizing strength to Redecan's actively also and organization. through their decision, a focused we Redecan and planned, the our demand. nimbly these to connect and commercialization at consolidating line across closely QX, heart we retailers and to market from working to able on products a through medical, this similar that put We're product are evolution, the to forward, operations results on consumer of with expect improve efforts went respond of will under in experience changing put back of entire the our will Going wholesalers the we given and demand and also constantly be every to focus manage leadership their and see them actions will learn We'll of forecast apply in this our QX.

XX% For currently flower category the example, of in two largest know with and we category. is market, this the flower. number currently We are

entities coming required. together, of significant are and range cultivate With capacity categories to the positioned little we now well combination capital price add the entire of very the across with

and started edibles leading in pleased to of market suite and edibles getting Zenabis cannabis capability and position in HEXO indoor lean recent capabilities mentioned, production flower to in and the share market with evolving us responding to our capability, our And in and our category. to to have this fastest in also steps is significant we're full growing I growing the high-quality compete are and want Redecan's a beverages, this manufacturing part concentrates we're in and launching of and expand We greenhouse is announce HEXO Redecan, capture grow. pre-rolls, this from of to facilities continues We're now to allow mainstream category capsules, we flower acquisition from own putting in-house, Pre-rolls. by innovation the of resulting the leaders. responding compete margins moving as increasingly in-house Pre-rolls vapes, evolving capacity As category undertaking now can't maintain we the capabilities. sophisticated with position our I outdoor currently in demand room best. HEXO and market up across market-leading We're good, two highlight of just two leveraging HEXO’s the to production to to market And acquisition currently and in in with Redecan have range our acquisition anticipate also through the Redecan. the to to consumers sophisticated to increasingly in number are three oils. and due consumers. position we good, Edibles. market best-in-class large with increase keep better, to times.

positioned So LPs is that domestic I it and before leader, to the saying grow first well be Trent, Canada. positive a profitable and amongst in cash like flow maintain and to operating by over turn conclusion, HEXO as close to I'd in

to unlock positive short get higher organic through call that, achieve strategic with to this returns deliver in value executing consumer upside customer we and The right positioned And prosperity and medium Trent. will plan, significantly by would at to center I growth. we do. This like our well as and HEXO and shareholder is Path of Forward, path for term. We the long-term putting our on and has the by everything the to the new over transformation turn business is the

Trent MacDonald

Thank and morning, Scott, you, good everyone.

Before to this want quarter, point out key I results developments. I delve into our the

we quarter, the and of completed the During XXNorth Redecan. acquisitions

the continue capabilities cultivation We incorporating and into focus and facilities. our of into further release closure across these from public consolidation ties separate each organization, on completing recent productive our to capacity. of best integrations practices This including three the

into the some results key our financial Now highlight I'd like results. highlights actually and to jump within

have it. maintained recent just The our first Scott thing we share data, According market and to alluded to say, one I'd not like number to only Headset position.

gross two. while total revenue revenue XX% $XX.X from grew million, to and million. XX% ourselves between in have from In last our -- net QX, total both highest to adult-use That the We history. total said, revenue quarter net non-beverage million, QX to the grew grew revenue gap $XX.X grown number $XX

to brand, products grown we distinct specific rationalize the a consistently from to we on pipeline During that our demands. new family SKUs, Stash offering ensure selected quarter, Under SKUs genetics their full out an currently our based exercise and which existing genetics, now OS radically is portfolio under customers of Original the and innovation launched of our review are our are quality. highest bring undertaking and have conditions did

launching OS more under streams year. and will genetics product Our over these lines new Haze, the first we next and are be genetics OS products Kush

one effectively recognized 'XX resolved decreased while Quebec, QX the from During the of the XX% as decreased market share, revenue summer months. Truss 'XX, is which of quarter-over-quarter in logistical during quarter, International QX beverage two XX% to markets warmer due spoke seasonality beverage sales result QX. market was nationally. of however, quarter-over-quarter periods net maintaining The decrease to of XX% attributable share respectively, and QX. sales number also increased the continue XX% key in and Beverages, the by sales the to Company a Ontario as deep we did issues in in lead capturing sales in

we are of move We net the on focus continuing to with increased as Medical international acquisition forward. QX from Redecan. sales XXX% sales

entity leverage to further the are strength market our We medical continuing ground. to of assess the and gain combined

of beverages, calculate from profit quarter, in Redecan the increased Medical we business related margins beverages, the which to to been of and sales than -- gross sales XX% due related As increase at from the mentioned margins, margin. we spoke the Overall, some the value Zenabis international medical crystallized a in I gross gross fair realizing Gross accounting XX% relatively sales removed result our wholesale purchase higher the Zenabis adult-use net cost from to fair the of have improvement about adjustments. order minor margins the higher-than-average ago. to adjustment, price in which margins before on was gross cost the communicate of margin margins of sales average consistent Zenabis, a Redecan QX. Redecan impact adjusted at activities, value in in to to to addition gross contribution was which a the our excluding increased few gross are crystallization in consistent would acquisitions and adjustments, last about of sales. XX% at sales, before XX%, margin QX included sale gross of XX%, at to the In of otherwise The better remained of have realized upon inventory, relatively while remained previously XX% moments the sales, and margins Redecan spoke XX% integration planned excluding synergies. increased with after

Looking ahead, our on HEXO improve margins. is gross focused

savings Scott improving and mentioned, the are realizing utilization, synergies and we As focusing cost across additional driving on manufacturing, organization. cultivation and

added these best net marketing elsewhere. at products actively are we SG&A, of where our SG&A practices SKUs and expenses, XX.X% in together, applying look and from improvements represented as In we promotion from operating These, relation core R&D. are down We reviewing have revenue, XX.X% and strong when margins QX. to to make the

our Canada to XX, of October XXXX, and XXXX. the $X.X investment initial historical related the and cash and and increased decreased of of PTD, recoverable our the cost driven percentage continuing expect QX, a fall aggressively under SG&A the fees increase increased focus campaign expenses cutting, part in senior ongoing of no million operations which KITs as impairments a are we valuation restructuring management core result is related from as from Redecan value and acquisitions acquisition-related fair $X.X others, LP Zenabis, increased in of $XXX of relation us extraction QX during integration as as In primarily around their impairments investment specifically, as These there million on the at to carbon resulted and Beverages, changes XXXX. promotion QX warrant earlier. in QX primarily namely the the the an to XXNorth As Adjusted of project, investment as promotion to acquired again and indefinite work over impairment in of Beverages, initiatives. are result million through million new million Molson to from it $X.X to Marketing of during the to existing indicators the the of as $XX.X Truss Truss additional our expired $XXX,XXX it as the to QX, the Share-based to mostly enhanced brands, On the costs, XXNorth as such, million, and XXNorth. of sits and issued amortizable to was part investments related of significantly and across timing million and million compensation to of to and term, as through about, discounted The to and revenue EBITDA a increased and due were increased million. value $X.X Redecan for broker as $X.X $X.X in personnel and of the Acquisition elevated decreasing and Redecan to longer $X October legal this of acquisitions. on we million. Finance XX%. the increased August to October of continue value and million. at increased over included The result suspension warrants intangible certain another a vesting fair intangibles synergies of Restructuring Amortization XX, I impairment QX. Redecan loss our Loss Zenabis. write-down talked were of options down somewhat assets, in G&A, in financing. granted $XX organization These amount. of the is costs of costs transaction acquisitions remains noted Company's operational down Truss offset unexercised $XX.X its acquisition $XX.X the adjustments, the QX. marketing million the over due increased flow advisory at $X.X by over from a investment previous licenses result carrying associate PP&E initiatives. This QX cultivation, performed Impairment KIT the of to million. which negative relates EBITDA quarter. through brands of

production As million planning we achieve through would manufacturing move switched three all to and believe we and integration the integration cost of We now We simplify $XX We and and plans transactions. successfully $XX to closed structure. have now as from organizational able obtain target we synergies, the earlier, execution the synergies, Scott realize robust we to forward plan and in spoke thought over approximately streamline costs, created. exceed be will to synergies we originally million. reduce

foundation an million out, did our Forward, over results annualized into now on been to I like a that would now basis, on will which happy over We in From HEXO come build have I Scott this here to sits and earlier. great commitment our It's them such The synergies focus on those future, personally believe $XX year. at on take key will with the my final realized outlined everyone for earlier, thank HEXO a which questions. quarters. coming such them is be now and dedicated of note, any great effort concludes a a pleasure Path the Operator, be job not remarks. On focus. as past and team. hands. our prepared with would a has but This I wholeheartedly priorities repeat their five good by will and working because our articulating ongoing we Scott to for resilient that

Scott Cooper

with turn Trent for his of to the we a you, HEXO you remarks. future Wish HEXO closing then, before provided on thank has I’d this it behalf And for us of service the thank, everyone, foundation all to Board want over and the couple endeavors. I your in past just for Company. again, Just months morning. management XX once best once thank the questions, over joining strong transformation the to Trent, again, team. like a of

more all operationally be across leading Canada, are soon, confidence the growth, within debt first right now I flow the are in our I’ve outlined capital, margins Look we'll forward speaking we and I on open up and believe long-term of issues. organization for forward cash significant As four us through have this country to next for believe prosperity you be in work continue positive and it as accelerate questions. value be and to in the path opportunities full path we the quarters. to is there cost, to stewards consistently major aggressively attack network effective the to significant today, expand cannabis there

Operator

[Operator from Please go from question Partners. comes ahead. Aaron first Grey Instructions] Global Your Alliance

Aaron Grey

doing much pressure, But Scott, under the now market. category, just question the on guess within it you going guys of -- you first just guys biggest The on to as [indiscernible] around don't you side, share forward, share improve the particularly anymore, flower pricing kind appreciate compete as want pre-roll are trends mentioned Path on the you I side flower the well. is the But the how there what some market sounds I like, on side? Forward. are market for in so would to be me forward, So doing the And of currently guys looking specifically the going Canadian terms

Scott Cooper

bring as Zenabis the Yes. good, if facility, flower Thanks is the the product look is better, would in-door from best, cultivation got the with to at with our with acquisition a category, opportunity want we're and result where manufacturing. strong, for at capacity higher currently quality question. acquisitions, and I shortly. particularly this, line. -- said, we're we at cost a we we market the both number One got as the about, future, continue of the if What genetics are full the grow thing -- which look facilities we We've a Redecan, on to good as to range to though, best-in-class Atholville the We've bringing we say we'll expand HEXO structure, and of look growing Val, a new flower you systems. testing and have compete Zenabis to of we category in in excited a across we're

new position to with where where, of lot into and move a we again, a opportunity have acquisitions, I'm the strong additional So have flower excited we segments and about categories. is

Aaron Grey

And from on just second color. that question the that. me synergies. Okay. Thanks I for the appreciate

believe look of mentioned between then $XX and expecting you split the SG&A, how could many And I million, -- synergies to-date. you some million a Could the So realize And you get million? you just terms million? original $XX timing in versus $XX please now color realize repeat if of that? offer to realized COGS then to full you provide where the $XX to to

Trent MacDonald

Aaron. Sure, Trent here.

to about the far, $XX So, synergies. we've so million of managed get

to our all the this quarters. which the expect amount, Obviously, through of over P&L is annualized an You come next that see don't in we QX.

have some QX. We in those realized of

coming among XX%, result Langley, of is coming other margins back which Zenabis, some note of talked You'll closure approximately -- the about a things. in from we've as to the the that BC, of synergies

and go quarters. get over over we to next expecting four forward, be As would three, that we're $XX to million, the

we and closure and in the our February, take at know, the you annualize. January will the did take of relation with we end of As do which of to end start Atholville, the to initiatives annualizing quarters. facilities, in which to some four productive several those place will doing but some after are want announce of next we There's this haste, capabilities Molson time, all will of three, which other Redecan, and this start over

acquisitions. So the see full of these benefit you

Operator

Please Parikh next from And question your comes from Rupesh Oppenheimer. go ahead.

Rupesh Parikh

just I So wanted HEXO-based on business. the to touch maybe of more

if So the appears M&A, base it year-over-year. the out take I declined business

HEXO maybe color the happening with in So what's terms recent just more some of excluding M&A?

Val Malone

you terms what happened Malone. market in I It's tell our forward in really of we're share. Val I'll what's the on doing past, but take the I can question. can't comment overall much growing too

many our fact, that We number within in in one, space, in and cannabis others. way to on categories doing are, the

we're needs, fuel deep their is understanding forward a this overall. move and consumer the we cannabis growth, really it and very fueled evolving and states and their market that As share driving ensure engine by being to of need organic

to Scott as family. and market with alluded our brands the to expand on in products onset on growing continue understanding focus, focused HEXO our grow the that position all we to them within other these so the timely share are and delivering way is And that organically the and ensure really consumers, right our

Scott Cooper

about because customer we've I'd gap talked versus closing the Yes. that, demand. to add And

at that we're a as of portfolio be the consumer at best category. at of of looking can the and also as we're full part look putting And will margin talk investment focus that full consumer of accelerating we for are brands the customer growth. in meet meet one by look the we needs. fast-growing not fast, Yes, brands increasing one business the optimize the pre-rolls Consumers managing looking are I certainly and to across at by managing of closing but totality, to how to would kind we're -- highest in about anticipate -- set needs moving as we segments. aggregate in brand it. optimize of it So range, demand, the margins And the the again, opportunity cultivate we're as growth, and gap you opportunities a that brand, necessarily as to forward, we portfolio,

Rupesh Parikh

have That's just operating Great. positive And Okay. to within color. you out that flow cash commentary. you are flows free positive helpful guys on four cash target flows the referring or quarters? cash there, When then

Scott Cooper

flows. cash Operating

Rupesh Parikh

Operating.

one just maybe final And Great. Okay. question.

you of have that on significant Just Redecan. done. acquisitions Obviously, more was recently that guys the one

surprises Just or at any as M&A? so positive negative far, you look that major

Scott Cooper

capability to very strong I'm most But the capacity Redecan the mentioned think the really I about portfolio. is strong the has have Head around excited Jackie to and those. of where I Science HEXO pre-rolls. And approach with Fletcher -- I'm the organization as had -- particularly across compelling technical practical the strong, and where capability. capabilities. addition that's the Redecan really to They in appointing applying a organization Redecan, their she bring Jackie excited to

capability like be to we'll as bring And increasingly that get so that talent you into brings quickly. across Redecan saw to new also they -- really that segments, as enterprise. infrastructure, into the HEXO, new is and tapping much ability when Redecan And their formats

Operator

from Chen Tamy from Please Markets. comes question next ahead. Capital Your BMO go

Tamy Chen

thanks for Hi, morning, good the question.

cash from is First provided. flow targets on the you've that me

make because sure I incremental. about First, I understand just talk you to want

your cash operating was in this $XX flow burn QX million. if So fiscal about I quarter, look

$XXX will how the be So on incremental rest get So of fiscal to fiscal positive underlining have this an $XX share of in be swing an And million the there did you Like the saying million that And additional for can more then year, operating there'll positive flow? this? XXXX, cash are top targets? that XXXX? fiscal I assumptions understanding on correctly? swing you you a of bit these am you

Trent MacDonald

Tamy. Sure,

major right now, integration in of of two we acquisitions. There noisy terms So as noisy, two the these was on Zenabis of okay, The flow. cash QX very acquisitions. extraordinarily -- continued integration closed closing was

to Scott of dramatic next the able organizations consolidated are to consolidation some foremost, improvements to facilities, SKUs, that to first those So over we're look these is as flow we the talked cash of flow we one continue in Val Where And robust. the going the combined several QX very organization, impacted the rationalization strength bring integration about as one of the that of synergies you go quarters. obtain and we both going it's not another and of of unit. cash we at indicative the operating things, talk and be is have our see about, each forward as believe to come the

said haven't in asked we And loud, quarter, right it but get believe -- we EBITDA we although that so positive will to not that now, believe this not we and QX.

is our what works be in current is, how and see positive that's that's So out, EBITDA that goal what to our goal but we'll quarter. this

to continue QX. than there, from provides flow what said, positive cash basis And immediate cash better an you goal so our get we in flow is next with And us several and had that then I quarters the in build. like operational to to on

initiatives of lowering of as go Scott So as cost capabilities, the cost-saving and about that combination the well the that's where allocations some costs rationalization really some of of on it into the our certain overhead -- comes the goods. overhead and of SG&A, productive into talked go that

impact And earnings. it so has those not bring as down, cash, on a you positive just

Tamy Chen

Got it.

match some to more of improve, planning -- large see we that second are Okay. focus to something be it's nimble also time. cultivation but trying And LPs your taken demand the question up and companies. some to keep And they your them my with seem smaller, in is is struggle to unable other better with to

more to do and essentially please you constant expectation newness? the especially consumer keep can demand with the better what up on intend for to you So elaborate

Val Malone

take here. this one. I'll Val It's Yes,

the again, reinforce the consumer think at planning I'm deep to just I going the onset, for understanding the future. of and

what So we good of cultivate to advance. have a understanding in

terms Canadians key putting The management working systems to there of our the cannabis. these. are coming that continues further against in demands rooted But across fact see from based plans manage to in opportunities that of place for fact the cross-functionally place demand that's appetite that farm integrate second we and looking to cultivation the parts in to all organization to the a and supply. that be we count able in of together consumers, overall really ultimately, system is the immediately ensure all component their consumer evolving cultivate Integration is ensure or in and taking it's collaboration deep the work systems right have and which taking need

Trent MacDonald

I build that, on could If just of a couple Tamy. specifics

of as much of And the a the gives again, in growing, that And needs, talks to to that's better and management farm usage be attitude how occasions. of consumers and -- and mean, of understand highly we implemented consumer a growing. one organization in consumer us out our underway. about which is highly, going, number that using really Canadians us But front I be understanding heart reasons which mentioned we've Val called obviously study, X,XXX-person our we've people where believe, -- do knowledge. quickly, Val just the high cultivation, that just a completed And break deeper are and visibility there's what's we're gives automates simply that. system, I at So, right everything will something it's connecting

got continue facilities allows have we And flower grow a we So sight us have number with Atholville, to as consumers, then the on And new we news. and system our we strain constant other to how with and going integrated grow to quickly. flower indoor genetic it -- to set particular we significantly that how our with with line early capacity and higher we've is And quality then so of if the out. resonates flower a a bank, of smaller scale and really coming a explore I have with have of rooms. the online, to it increased innovate in mentioned, that turn scale product find particular a

So across that capability that the to going to use allow we're network compete effectively the space. us to really in -- full

Operator

from Your Capital Douglas Miehm from RBC go next Markets. ahead. comes Please question

Douglas Miehm

the you and believe flow I going XXXX, come is $XXX about opportunities. for million cash in operating from incremental revenue incremental think I to As that mentioned that of XX%

$XXX say, extra can Can to to we tell gone about in about incremental around let's even me year. million, So I've where wrong you $XXX if It to come revenues. XX% million where on you margin next And revenue a or that means that's give occur ensure were million. going here? that, those $XX

Scott Cooper

so, at the opportunities in the the of looking Yes, mix marketplace.

than I've So on there's, if a Redecan our and I It's kind of we demand flower doubles in in capacity break machine as X.X today. it the format, down We that talked the day. cannot pre-rolls upside portfolio the our produce machine significant meet a out about million facility per installed more at it capability. coming We've together. with Italy just believe of can pre-rolls by

HEXO, We the getting better, together edibles. getting with are just started good, from that in brands around best. of with just started number We come We're vapes.

We now value have proposition. across range an full of opportunity the to compete the

have We opportunity an expand to geographically. Redecan

to We sales. to expand an continuing expand international our to have wholesales. opportunity We're look our

there's a opportunities, Canadian those, pursue we continue within specifically just So, it's range and huge the marketplace. not aggressively of all to but

Douglas Miehm

Yes. I understand. Thank you.

the stock meet available that you say, mentioned. payments are the with be be for your you going question has hurdle ATM, do at let's price? to Is to And Second at, that $X issue below would due? to to just willing any

Trent MacDonald

options to looking around we're at now, Right itself. the debt holistic solution the all

best in silo. table our we don't to our investors, to always going mind our do working thinking to to be and all with we're about in that's that going options anything advisors Board and remain and want be the to want so anything of keep in on not on we that control our extraordinarily we're be own going So we're we destiny. liquid Right damaging. what obviously Keeping for now, think is

-- in So available is, ATM but ATM, to will but available is, continue tomorrow on the on and be no specifics fact, today to willing the us. what to we're or do it is

Scott Cooper

the we I we all options of the say decisions as front would shareholder of mind and is thing through driving our value. we're maximizing evaluate making decision a That options, every with it's that number looking of options, one the Trent our at the we optimize value. a lens number said, of shareholder And but all always we're different do of at as make. how with exploring

Operator

go Your Please next CIBC. question from from ahead. Zamparo comes John

John Zamparo

notes your made so of Setting sheet. end balance cash the about ask there's get unrestricted you now, to aside convertible some know issue the the I wanted $XX for million at the quarter the comment rate it's even and you credit quarter. at I or more not burn one through of just of trying sufficient Company's the QX current But months? press representative, through the what ATM. sense You a earlier, raised but to not to the to to expect number what leaning plan disposal is of Or release. Can a how on mentioned at in maybe give is is investors the the And address options about a your of thinking that? this? get I'm us your raise coming towards? should capital you in is what sense

Trent MacDonald

-- it again, the mean, noisy in is John, Yes. you're QX. look, very, right. I very

we've see to -- ourselves an certain don't cash, of wanted quarter. yes, yes, of those it things initiatives the through the and debenture. do We continue shareholder we at in the future We With million that value in maximize when around integration based try front I that quarters. $XX to look, talked synergies do prepare -- somewhat the going event synergies, think believe of But come regards we play. can't you indicator options all to the to timing of both we really was to to our are that's us. and ATM So on keep the into and those use about

two quarter. the -- Some a closed quarter, to on which as cost in acquisitions of there alluded to initiatives, initiatives that impact of the in major or know but detail quarter, you future doesn't In we initiatives. obviously goods were massive about repeat and operational current two itself you alluded our to, Scott the that SG&A just not talk have in capital

combination that own, the but initiatives. of of quite now. right Forward lot flow the with to several a away its goes all liquid we're So have believe on we other that quarters. get believe The we just the And Path next cash positive within do We

John Zamparo

of capital discretionary the the was to Okay. CapEx, the pre-rolls next of bringing the over in spending this spending the And Or on was to And on? of given capacity million CapEx with committed couple the and reconcile, in you over vapes I'm it projects a on necessity of are amount It is you're state spending Company balance quarters, the elaborate guess, particularly sheet. the $XX the about on referenced? on follow-up a you just few expanding is spending? is of significant Can what is you my quarter. what of And I side. that necessary? some given trying talking other

Scott Cooper

Yes.

that address let So me one.

focused we are opportunities forward look investment. forward to that they further. capital with disciplined And I move capital our capital significantly acquisition absolutely laser-focused use are synergies things as We on curtailed proceeding six of to capital -- capital continue spend. weeks one we strong business. the around we We are the by that investment on on I be and and point joined disciplined we cut of business in when The will We integration plan at was all first very to on the continue related ago. we cut return to did the dollar of return the our to in any opportunities have that and time XX%,

Trent MacDonald

spent. slightly on There's that look, just quite that categories know to gets us amount frankly, future already enabled. that of And cash flow not which we of is been CapEx large for invest need that expand the a enabled. in. already that, we We're will I too has much

with compete we spent. believe we already categories well have in that productive and move can key really forward the So capabilities been

a a a CapEx I have large future have think that's amount that component of initiatives here So we don't of that we into. key to lot put

Operator

Buckham your Your Adam, question is ahead. go Please Adam next open. from Scotiabank. from comes line

Adam Buckham

give us out? just the quarter flows that little to because expect for where to moving million all get normalizing question, the been you a Hey, at understand wanted base sort my was? hammer cash the for some I little more you about static to more currently. sitting but we would in you the where parts you of Like know normalized flow of happened have there so to you what dig on this Trying taking $XX-plus there. to able what I do a kind that you're was point, clarity Is on sort talked sorry. quarter. information of guys. you more free on Are this cash Thanks muted

Trent MacDonald

to that. costs it's Yes. is with mean, come QX just all not Look, the they have thing that is and that acquisition that I go recall then with the the you into costs big the go -- transaction

fully functional that still have haven't your rationalized several your teams, you You you actually the operational and your areas, -- as these are facilities into that quarter. operational organization, incorporate completely throughout

sort of All that of away. goes

BC, these we Stellarton, both amount as the for a as mean I Lake, Langley, of of are you Kirkland QX. know, site of Branford impact So, some HEXO which had -- for sites, lot XXNorth. all and Branford cash in

And so that goes away.

our getting people teams, it. of whether where and all place get QX, all addition you're and your values culture you're in synergistic put yet those really the of again, haven't other to to, you functional taking these it's all finance, out through areas, of systems have areas In and you organization

heavy. And so cash all a is And that impact it's of okay? QX, in

audit-related that, some in issues. addition you a addition Now lot going advisory in to forward, consulting of a of lot fees, had to

lot fees So, there's there. in of a

in the cost-saving cost All XX% And rationalizes great which of that talked product launch. quarters. on several expressed be in rationalizing over the coming no missions market longer on we you're that conducive spends, It's a COGS Scott pricing putting every of but every category, not and next about itself going by not to those to into that, undercut to on lot single earlier, while you're margins, business. also the depth. into trying of effect XX%, Val side, improving market all just on and In we're side, and

have market. on believe these able be if of, not fact, do the paper so which cost positive tremendous doesn't long get And put things build. be lowest a because in you one flow in to And what together, to we all to on cash take are, we it put base producer to and the of you to how we

Operator

questions back the call the will further presenters no remarks. closing are there And at to turn over this for I time.

Scott Cooper

again internationally, take the indoor and presents. once the set all just I that grow and I'll in bringing on much. positioned capability, capabilities pre-rolls. in fastest-growing of very facility, brands, highlight together opportunity companies believe the have market, the of segments HEXO many and different we capitalize position to Canadian leading that brought segments to the uniquely HEXO assets. of the in you opportunity bring the like We the really a different reinforce is of that Thank the

our capital. said costs the have opportunity I the tax of margins, stewards expand to previously, as margins, effective We more aggressively and grow

I customer We're as confident to operational focused said, are organization, believe and consumer the of on as term this flow long-term that, forward you, we for prosperity the and issues. value we've on We significant debt I in the focused right of in we're very heart right that look And everything -- getting do. positive the continue the cash on at soon. very be and to speaking and there's questions, through with to we out. laid path work thank -- everyone, other With that plan path no

Operator

call. conference today's concludes This

now may You disconnect.

HEXO (HEXO) 14 Dec 212022 Q1 Earnings call transcript